tag:blogger.com,1999:blog-235433516644980443.post8295654777097062188..comments2024-03-27T05:08:10.195-04:00Comments on Jeff For Banks: Loan Pricing: Must It Be So Complicated?Jeff Marsicohttp://www.blogger.com/profile/12153599647481141591noreply@blogger.comBlogger13125tag:blogger.com,1999:blog-235433516644980443.post-21312959176795878182018-02-24T07:51:47.426-05:002018-02-24T07:51:47.426-05:00This comment has been removed by a blog administrator.ukahsah15https://www.blogger.com/profile/15882717272995410559noreply@blogger.comtag:blogger.com,1999:blog-235433516644980443.post-42978716489398298992017-10-11T13:19:03.902-04:002017-10-11T13:19:03.902-04:00Zoniko,
Row 7, Capital Allocation should be deter...Zoniko,<br /><br />Row 7, Capital Allocation should be determined by your institution's perceived risk, and therefore capital needs, for the product. So your board may say 5% is your base capital, and a buffer for commercial real estate loans with a 6 credit rating is 3%, then your capital requirement for that product is 8%. Some similar type of analysis should be part of your institution's capital plan, as well.<br /><br />Row 11 simply takes the ROE hurdle rate * capital allocation * loan amount.<br /><br />Thank you for the questions!<br /><br />~ JeffJeff Marsicohttps://www.blogger.com/profile/12153599647481141591noreply@blogger.comtag:blogger.com,1999:blog-235433516644980443.post-84847866106697310422017-10-11T13:12:44.100-04:002017-10-11T13:12:44.100-04:00Windfactor,
Absolutely. If incorporating risk, th...Windfactor,<br /><br />Absolutely. If incorporating risk, then you would need to risk-weight the asset. That's how regulators up the capital for perceived riskier assets.<br /><br />~ JeffJeff Marsicohttps://www.blogger.com/profile/12153599647481141591noreply@blogger.comtag:blogger.com,1999:blog-235433516644980443.post-6715762981709432352017-10-10T14:19:49.054-04:002017-10-10T14:19:49.054-04:00May I ask.. how was row 7 incorporated in the resu...May I ask.. how was row 7 incorporated in the result and how do you get to row 11?<br /><br />thank you!zonikohttps://www.blogger.com/profile/02524233147961605512noreply@blogger.comtag:blogger.com,1999:blog-235433516644980443.post-15711409663564881952017-05-20T06:33:28.919-04:002017-05-20T06:33:28.919-04:00can regulatory capital charge be used if the bank ...can regulatory capital charge be used if the bank does not have the economic capital charge available?windfactorhttps://www.blogger.com/profile/06943079294033344910noreply@blogger.comtag:blogger.com,1999:blog-235433516644980443.post-77603093307142259392017-03-06T15:49:27.808-05:002017-03-06T15:49:27.808-05:00The borrower said that's what the competition ...The borrower said that's what the competition was offering and I had to be there to get the deal done :)<br /><br />Actually, it is (Row 11/Row 2)+Row 6+Row 9+Row 10.<br /><br />Hope this helps!<br /><br />~ JeffJeff Marsicohttps://www.blogger.com/profile/12153599647481141591noreply@blogger.comtag:blogger.com,1999:blog-235433516644980443.post-62365468574165190412017-03-01T21:44:27.371-05:002017-03-01T21:44:27.371-05:00So how did you arrive at 4.38%?
Thanks
So how did you arrive at 4.38%?<br />Thanks<br />Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-235433516644980443.post-1667662987162641052016-09-07T07:32:09.090-04:002016-09-07T07:32:09.090-04:00This comment has been removed by a blog administrator.Anonymoushttps://www.blogger.com/profile/07875203279258036603noreply@blogger.comtag:blogger.com,1999:blog-235433516644980443.post-72825302301210436772015-09-12T03:24:38.085-04:002015-09-12T03:24:38.085-04:00This comment has been removed by a blog administrator.Anonymoushttps://www.blogger.com/profile/04234131747571172930noreply@blogger.comtag:blogger.com,1999:blog-235433516644980443.post-60048398344605214302013-09-10T00:55:33.985-04:002013-09-10T00:55:33.985-04:00This comment has been removed by a blog administrator.Anonymoushttps://www.blogger.com/profile/09859156845543651899noreply@blogger.comtag:blogger.com,1999:blog-235433516644980443.post-52866571469800467112013-09-09T10:55:18.718-04:002013-09-09T10:55:18.718-04:00I think the flexibility comment based on relations...I think the flexibility comment based on relationship is a fair point. But the challenge becomes, in practice, this may result in the downward pricing and profitability of relationships, as we reduce pricing to "keep a good relationship" (counter-intuitive, in my opinion).<br /><br />So, if you are a believer of the 80/20 rule, then the result may be that you are gravitating toward 81/19, 82/18, etc.<br /><br />Holding relationship managers accountable for the ROE of their portfolio may mitigate this risk.<br /><br />Thanks to you both for your comments.<br /><br />~ JeffJeff Marsicohttps://www.blogger.com/profile/12153599647481141591noreply@blogger.comtag:blogger.com,1999:blog-235433516644980443.post-19687003735687391242013-09-07T17:03:00.827-04:002013-09-07T17:03:00.827-04:00Model is fine. Banker should have ability to adjus...Model is fine. Banker should have ability to adjust spread over TP cost for relationship/competition. With limits of course, but they should be allowed some flexibility.Anonymousnoreply@blogger.comtag:blogger.com,1999:blog-235433516644980443.post-54569923553324174032013-09-07T12:02:59.608-04:002013-09-07T12:02:59.608-04:00Jeff - very good post and being a big fan of the K...Jeff - very good post and being a big fan of the KISS principle, I like the simplicity of the model.<br /><br />The derived "Recommended Minimum Loan Yield" is ... or should be ... substantially different from product pricing. The result displayed in this analysis would equate to final pricing only if a Bank was competing based on price; however, those Banks that compete based on Relationship (aka Value) then the result should provide an indication of break-even costs ... the banker would still need to determine the appropriate pricing structure.Serge Milman | Optiratehttp://www.optirate.comnoreply@blogger.com